by Sanjeev Sularia
All around us bargains sit on virtual shelves, with e-tailers flashing up low prices against the “official” price list in a bid to woo customers.
This is the bizarre world of Internet pricing, where everyone is claiming to have the best deal in town. The result is that almost no one pays the full list price or manufacturer’s suggested retail price (MSRP) when shopping online.
With our analytics system at Intelligence Node, we monitor the pricing of 130,000 brands in 1,100 categories every day. We have found that no more than forty-five percent of products are sold at list price online. For example, camera accessories, baking ware, food cupboard staples like sauces, marinades and dressings, ready-for-consumption frozen goods, and pet care merchandise are sold at list price just one out of ten times. Pricing has always been complex online. On some sites it is transparent and the price you see is what you pay, on others you have to factor in vouchers, shipping costs etc.
It is a fact that ecommerce retailers entice buyers with large savings off of the advertised list price or official prices to get a sale. Online retailers know that online consumers want to search out a bargain and will come back if they get a good deal. They will also tell their friends and family.
A number of lawsuits alleging retailers are engaging in deceptive pricing by claiming markdowns from arbitrary official prices have already been introduced to the courts. For example, back in 2014, a group of California district attorneys brought a false advertising suit against Overstock.com, accusing the online retailer of flagging up misleading list prices in order to overestimate the amount consumers were saving.
Standard pricing has had its day
The Federal Trade Commission (FTC), is already investigating these pricing strategies, which could result in a crackdown on advertised official prices.
Pricing is a difficult area for e-retailers. But one thing is for sure, if the price is set too high, customers will jump to a competitor to make a purchase. But if the price is set too low, e-retailers risk cutting margins too fine and building a consumer following that always expects pricing that is unsustainable for retailers.
With online shoppers continually searching out bargains, real-time, continual pricing adjustment focused on market factors is the only sure fire way online retailers can get shoppers to return to their online store. This concept is called price optimization.
In a twenty-four seven online shopping world, pricing response time is critical. Automation enables online retailers to optimize pricing around the clock, in a bid to beat the competition and make a sale.
Online retailers need to be able to analyze their online pricing landscape, which encompasses tracking new and returning customers to optimize for demands, trends, products and pricing, as well as regional differences that may influence online shopping habits.
A pricing solution should be capable of driving revenue with better insights into pricing levels and shopper behavior in real time. Dynamic pricing must be able to adjust to changes in the market and consumer trends as well as target products and competitors.
A powerful price optimization tool will enable an online retailer to get a head start on the competition, where official standard pricing will be a thing of the past.
Sanjeev Sularia is CEO at Intelligence Node (www.intelligencenode.com), a leader in the field of pricing strategy automation.